Geshy Singh
Sometimes employees retire early and this could be for one of two reasons; retrenchment or voluntary. Of course we are not referring to medically bordered off individuals.
Early retirement is from age 55 and normal retirement is age 65. Retiring early could actually result in receiving HALF your income if not less! There are many factors to take into consideration; for instance from what age did you start saving toward retirement? How much is in your pension or provident fund? Have you supplemented with a retirement annuity?
Do you have other forms of savings for retirement e.g. unit trusts, endowments and investment property? Then you need to carefully decide what your budget is and can your retirement income meet your needs. Basic expenditure could be medical aid, food and living expenses, petrol, insurances and maintenance of dependents if applicable.
The number one mistake that most brokers and individuals make is they plan for day one and not for 20 or 30 years down the line. Remember the prices of goods and service increase annually so if your broker suggests that take a higher income with no increase or if you opt for this, when inflation and price increases attack your lifestyle, you are very likely to regret this decision.
A competent planner should be able to provide you with a monthly or annual detailed cash flow statement be it for 10 years or 20 years from retirement. Ensure if you retire early, your income can keep up with increases in your expenses and determine for how long?
Ultimately retiring early could be a very costly mistake that may seem cushy in the beginning but could turn out to be a financial disaster if an uninformed and hasty decision is made.
